Question 1

The purchase of a company that is in the same industry but involved in a different activity is called a

Accepted Answer

The answer of The purchase of a company that is...

Question 2

On January 1, 2014, the LaRoche Company purchased at face value, a $1,000, 4%, bond that pays interest on January 1 and July 1. LaRoche Company has a calendar year end. The entry for the receipt of interest on July 1, 2014, is

Accepted Answer

The answer of On January 1, 2014, the LaRoche Company...

Question 3

When investing excess cash for short periods of time, corporations invest in

Accepted Answer

When corporations invest excess cash for short periods of time, they tend to choose low-risk, highly liquid securities such as treasury bills, commercial paper, or money market funds. These types of securities provide a relatively safe and easy way to earn a small return on excess cash without tying up funds for an extended period. Investing in stocks or debt securities can be riskier and may not be a suitable option for short-term investments.

Question 4

On January 1, 2014, JBT Company purchased at face value, a $1,000 6%, bond that pays interest on January 1 and July 1. JBT Company has a calendar year end. The entry for the receipt of interest on January 1, 2015 is

Accepted Answer

The answer of On January 1, 2014, JBT Company purchased...

Question 5

On January 1, 2014, the LaRoche Company purchased at face value, a $1,000, 4%, bond that pays interest on January 1 and July 1. LaRoche Company has a calendar year end. The adjusting entry on December 31, 2014, is

Accepted Answer

The answer of On January 1, 2014, the LaRoche Company...

Question 6

On January 1, 2014, JBT Company purchased at face value, a $1,000 6%, bond that pays interest on January 1 and July 1. JBT Company has a calendar year end. The entry for the receipt of interest on July 1, 2014, is

Accepted Answer

The answer of On January 1, 2014, JBT Company purchased...

Question 7

On January 1, 2014, Tri-State Supply Company purchased at face value, a $1,000 7%, bond that pays interest annually on January 1. Tri-State Company has a calendar year end. The adjusting entry on December 31, 2014, is

Accepted Answer

The answer of On January 1, 2014, Tri-State Supply Company...

Question 8

The purchase of a company that is in the same industry and involved in the same activity is called a

Accepted Answer

A horizontal acquisition is the purchase of a company that is in the same industry and involved in the same activity. The other answer choices (controlling acquisition, parent acquisition, vertical acquisition) do not accurately describe this type of acquisition.

Question 9

Why do corporations generally invest in debt or equity securities?

Accepted Answer

Corporations generally invest in debt or equity securities for multiple reasons. They may have excess cash that they want to put to work, they want to generate earnings from investment income, or they may invest for strategic reasons such as acquiring a stake in a company that can help with their own business operations. Therefore, all of the answer choices are correct.

Question 10

Which of the following is a debt security?

Accepted Answer

Only Treasury bills are debt securities. IBM stock and Treasury stock are equity securities, not debt securities.

Question 11

Which is not a strategic reason to invest?

Accepted Answer

A change in the economic climate may be a reason to adjust investment strategies or shift focus, but it is not a strategic reason to invest in a particular opportunity. The other options listed are strategic reasons for investment.

Question 12

On January 1, 2014, Tri-State Supply Company purchased at face value, a $1,000 7%, bond that pays interest annually on January 1. Tri-State Company has a calendar year end. The adjusting entry on June 30, 2014, is

Accepted Answer

The answer of On January 1, 2014, Tri-State Supply Company...

Question 13

On January 1, 2014, JBT Company purchased at face value, a $1,000 6%, bond that pays interest on January 1 and July 1. JBT Company has a calendar year end. The adjusting entry on December 31, 2014, is

Accepted Answer

The answer of On January 1, 2014, JBT Company purchased...

Question 14

Mazzeo Company acquires 80 Dodd's 10%, 5 year, $1,000 bonds on January 1, 2014 for $80,000. If Mazzeo sells all of its Dodd's Bonds for $78,400 what gain or loss is recognized?

Accepted Answer

The original cost of the bonds was $80,000 and they were sold for $78,400, resulting in a loss of $1,600.

Question 15

Corporations invest in other companies for all of the following reasons except to

Accepted Answer

Corporations may invest in other companies to house excess cash until needed, generate earnings and meet strategic goals. However, increasing trading of the other companies' stock is not a common reason for investment as it does not directly benefit the investing corporation.

Question 16

Mazzeo Company acquires 80 Dodd's 10%, 5 year, $1,000 bonds on January 1, 2014 for $80,000. The journal entry to record this investment includes a debit to

Accepted Answer

The journal entry to record the investment in bonds would include a debit to the asset account "Debt Investments" for the cost of the investment, which is $80,000. There is no mention of any other accounts being debited, so the correct answer is B. Choice A is incorrect because it includes an additional $8,000 debit that is not supported by the information provided. Choice C is incorrect because it only reflects the cash paid for the investment, not the actual investment itself. Choice D is incorrect because the investment is in bonds, not stocks.

Question 17

Mazzeo Company acquires 80 Dodd's 10%, 5 year, $1,000 bonds on January 1, 2014 for $80,000. Assume Dodd's pays interest semiannually and the July 1 entry was done correctly. Mazzeo's journal entry at December 31, 2014 would include a credit to

Accepted Answer

The answer of Mazzeo Company acquires 80 Dodd's 10%, 5...

Question 18

Why do pension and mutual funds invest in debt and equity securities?

Accepted Answer

Pension and mutual funds invest in debt and equity securities to generate earnings from investment income. This is a primary objective for these funds, as they are seeking to maximize returns for their investors. Investing for strategic or speculative reasons is not typically a primary goal for these types of funds. Having excess cash may be a factor in deciding to invest, but the ultimate objective is generating investment income.

Question 19

At the time of acquisition of a debt investment

Accepted Answer

The historical cost principle applies to debt investments, meaning that they are initially recorded at their purchase price. No journal entry is required for the acquisition of a debt investment as long as it is held to maturity. The Stock Investments account is not relevant for the purchase of bonds, as that account is used for equity securities. The investment account is credited for its cost plus brokerage fees only when the investment is sold.

Question 20

On January 1, 2014, the LaRoche Company purchased at face value, a $1,000, 4%, bond that pays interest on January 1 and July 1. LaRoche Company has a calendar year end. The entry for the receipt of interest on January 1, 2015 is

Accepted Answer

The answer of On January 1, 2014, the LaRoche Company...

Quiz 14: Time Value of Money

The purchase of a company that is in the same industry but involved in a different activity is called a

On January 1, 2014, the LaRoche Company purchased at face value, a $1,000, 4%, bond that pays interest on January 1 and July 1. LaRoche Company has a calendar year end. The entry for the receipt of interest on July 1, 2014, is

When investing excess cash for short periods of time, corporations invest in

On January 1, 2014, JBT Company purchased at face value, a $1,000 6%, bond that pays interest on January 1 and July 1. JBT Company has a calendar year end. The entry for the receipt of interest on January 1, 2015 is

On January 1, 2014, the LaRoche Company purchased at face value, a $1,000, 4%, bond that pays interest on January 1 and July 1. LaRoche Company has a calendar year end. The adjusting entry on December 31, 2014, is

On January 1, 2014, JBT Company purchased at face value, a $1,000 6%, bond that pays interest on January 1 and July 1. JBT Company has a calendar year end. The entry for the receipt of interest on July 1, 2014, is

On January 1, 2014, Tri-State Supply Company purchased at face value, a $1,000 7%, bond that pays interest annually on January 1. Tri-State Company has a calendar year end. The adjusting entry on December 31, 2014, is

The purchase of a company that is in the same industry and involved in the same activity is called a

Why do corporations generally invest in debt or equity securities?

Which of the following is a debt security?

Which is not a strategic reason to invest?

On January 1, 2014, Tri-State Supply Company purchased at face value, a $1,000 7%, bond that pays interest annually on January 1. Tri-State Company has a calendar year end. The adjusting entry on June 30, 2014, is

On January 1, 2014, JBT Company purchased at face value, a $1,000 6%, bond that pays interest on January 1 and July 1. JBT Company has a calendar year end. The adjusting entry on December 31, 2014, is

Mazzeo Company acquires 80 Dodd's 10%, 5 year, $1,000 bonds on January 1, 2014 for $80,000. If Mazzeo sells all of its Dodd's Bonds for $78,400 what gain or loss is recognized?

Corporations invest in other companies for all of the following reasons except to

Mazzeo Company acquires 80 Dodd's 10%, 5 year, $1,000 bonds on January 1, 2014 for $80,000. The journal entry to record this investment includes a debit to

Mazzeo Company acquires 80 Dodd's 10%, 5 year, $1,000 bonds on January 1, 2014 for $80,000. Assume Dodd's pays interest semiannually and the July 1 entry was done correctly. Mazzeo's journal entry at December 31, 2014 would include a credit to

Why do pension and mutual funds invest in debt and equity securities?

At the time of acquisition of a debt investment

On January 1, 2014, the LaRoche Company purchased at face value, a $1,000, 4%, bond that pays interest on January 1 and July 1. LaRoche Company has a calendar year end. The entry for the receipt of interest on January 1, 2015 is